Disputed Tradelines

Mortgage and Lending with Primary Residential Mortgage

Previously I had wrote that miscellaneous deposits were a huge pain in the butt for lenders. A close second pain in the butt are disputed trade lines on a buyer's credit report. 

A disputed trade line occurs when the consumer is challenging the payment history, balance, or information being reported by the creditor. When the consumer disputes the information on their credit report the credit bureaus will place a "Disputed Account" tag on the account. 

At first this seems like no big deal, however it causes a little bit of chaos. Typically if your customer is getting an FHA loan or the loan will be going through Freddie Mac's Decision Engine LP, if the disputed account is under $500 you are in the clear and no additional information is needed. If the balance is larger than $500 or your customer's loan is going through Fannie Mae's DU then you have to get the disputed account resolved and removed from the credit report. We all have to use DU for homepath loans!

Here is why it is a pain... most of the disputed accounts are in regards to collections, and we all know how cooperative collection companies are. Secondly most consumers don't realize they put a dispute in when questioning a credit account, and when the consumer finds out about the dispute is so old that the creditor has little documentation, so it becomes a little bit of a circus to track down paperwork to clear the dispute. 

Rule of thumb, when the disputed account shows up on the credit report during the pre-qual process, start working with your customer immediately to get it resolved as it could take some time to get resolution with the credit bureaus or creditor. 

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